The share price of this fundamentally strong FMCG company in India was down by 6.78 percent on Thursday which is due to muted results and ice cream business plans to separate.
Share Price Movement
In Thursday’s trading session, Hindustan Unilever Ltd’s share price was down by 6.78 percent trading at Rs. 2,477.80 per share from the previous close of Rs.2,658 per share. The share price in the past year has given muted returns and over the past 5 years, it has given around 15.60%.
What Happened
The notable decrease in the stock price was driven by the muted results in revenue and net profits reported by Hindustan Unilever Ltd for the recent quarter.
In its latest filing for the quarter ending September 2024, the company announced a 1.93 percent rise in revenue, reaching Rs.15,926 crore compared to Rs.15,623 crore in Q2 FY24. On a quarter-over-quarter basis, the operational revenue grew by 1.39 percent from Rs.15,707 crore in Q1FY25.
During the same period, net profit increased by 2.33 percent to Rs.2,595 crore in Q2 FY25, compared to Rs.2,657 crore in Q2 FY24, and increased remarkably by 0.65 percent from Rs.2,612 crore in Q1 FY25.
Regarding return ratios, return on capital employed (ROCE) currently stands at around 27.20 percent, whereas return on equity (ROE) is at 20.20 percent. The stock is trading at a P/E (Price to Earnings) ratio of around 56.6, which is lower than the industry average of 65.70. The company also boasts a strong current ratio of 1.64 and a debt-to-equity ratio of 0.03.
Their Home Care segment contributes around 35.98 percent, Beauty & Wellbeing contributes around 21.48 percent, Personal Care is around 15.13 percent, Foods & Refreshments is around 23.87 percent, and the remaining 3.51 percent from others in Q2FY25. Home Care, Personal Care, and Foods & refreshments saw a revenue fall QoQ.
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Management Commentary
Commenting on the earnings for the September quarter, CEO and Managing Director Rohit Jawa noted that FMCG demand showed moderating growth in urban areas, while rural markets continued their gradual recovery. He said “In this context, we achieved a competitive and profitable performance. We executed our strategic priorities by transforming our portfolio, generating healthy EBITDA margins and cash flows, and delivering attractive returns to our shareholders. We remain vigilant regarding the gradual recovery in consumer demand while establishing a sustained competitive edge through our business fundamentals: investing in our aspirational brands, scaling market-making innovations, and upholding operational rigor,” Jawa stated.
CEO on Ice Cream de-merger
Hindustan Unilever’s CEO, Rohit Jawa, stated, “Our grocery business remains distinct compared to our ice cream operations. The company has not yet determined how to separate the ice cream division, indicating that it could either be sold or demerged for independent listing. An independent committee will make a decision which aims to maximize shareholder value while minimizing disruption to the business.”
Further, mentioned “HUL’s robust research and development capabilities and their interest in retaining the ice cream portfolio, and “Unilever’s strong R&D resources are why we have a contract with them; all our R&D capabilities essentially come from Unilever.”
Company Profile
Hindustan Unilever Limited (HUL), headquartered in Mumbai, operates as India’s largest fast-moving consumer goods company. A subsidiary of Unilever, it offers over 50 renowned brands across various categories, significantly impacting daily life for millions of Indian households.
Written by – Santhosh
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